Joint Mortgage and separation - How to proceed legally

Today in US, couples who plan to separate are facing one of the biggest challenging issues of their life, i.e., a joint mortgage loan. In the United States,most married couples have made one of the biggest investments of their life during the course of their relationship, that is “buying a house”. Technically, the joint home mortgage loan is the main financial obligation for them.Before taking the divorce to court, they must settle the mortgage debt.

What you have to do in a legal separation agreement

• Initiating separation process:  File a petition at the court for separating from your spouse legally. Many couples consider themselves separated whenever they confront any major issues in their marital life. They get physically separated though they do not finalize the separation as per the court's order. The divorce courts in any state of America can grant their legal separations in some special circumstances.
• Draft your legal separation agreement: Don’t forget to specify the details of your total debts and the distribution of particular debts between both spouses. You must include the provision for paying the joint mortgage which is outstanding to both of you. You must decide the method of paying the monthly installments while you are filing for legal separation. There are two ways which you can take to sort this thing out. Firstly, you and your spouse can mutually decide one name between both of you, who will bear the burden of monthly mortgage payments totally. Secondly, as per the mutual settlement agreement, both of you can pay for part of the monthly mortgage installments.
• Signing the legal separation agreement: You both need to sign legal separation agreement and it must be approved by the judge.The agreement should be filed at the court. If any one spouse couldn’t fulfill or maintain the clauses added to the agreement, as per the joint mortgage rule, the court can take legal actions towards the property and impose sanctions on him.

In case of a buyout property

• Buy spouse’s property/interest:For couples, who are willing to break up their relationship, buying their spouse’s interest is another option. In this process, one spouse can buyout the part of real estate which another spouse is occupying. Through this process, one spouse buys the real estate portion of other spouse, and also takes care of the part of mortgage he or she is entitled to pay for. The buyer spouse will also be entitled for the equity of the real estate. If there is any interest, the remaining spouse will be getting that also.
• Title transfer with division of cash: First, you can set aside a proportionate amount of cash if it is available and occupied by the both spouses. The spouse will give back his/her part of interest and it will be transferred to the other spouse in terms of cash. The title of the property will also be transferred to sole ownership from previous joint ownership. It will be transferred to the spouse who is taking care of the whole property. He/she will be responsible for the mortgage payments after getting the possession. If the property title remains in both their names, they can put it up for sale at a specific date. The sale value will be divided between both the parties.
• Both parties are responsible: In case of a pre-existing mortgage loan, the above mentioned agreements would have no significant effect. The legal obligation to both spouses remains unchanged according to the terms and conditions of the lender. The mortgage lender consider both parties equally responsible for paying down the outstanding mortgage installments.

How to negotiate with the lender during separation

• Communicate with your lender about the legal separation between you and your spouse. These are some unusual situations where you’ll have to ask your lender to modify the loan agreement and a new loan agreement must be created proclaiming you the only owner of the property as well as the sole responsible person for the loan.
• If any one of you are the major income holder along with good credit history, the lender might give you an offer to modify the loan. The lender might ask you to renegotiate the loan and refinance it with a new name. So that, you will be the sole owner of the property and also the one and only prime borrower.